2.0 Board Terms of Reference

1
PURPOSE1
1.1
The Board has the primary responsibility to oversee the conduct of the Company and to supervise management, which is responsible for the day-to-day activities. In performing its functions, the Board primarily considers the interests of the Company to which its fiduciary duty ultimately resides, and then to its shareholders. It also considers the legitimate interests of other constituents such as employees, suppliers, and customers.
1.2
In early stage technology companies, the Board is more proactive in advising management on a range of operational issues, and holding management accountable for management’s decisions, actions, or lack of action. That said, however, the Board does not overturn management decisions, nor substitute its judgment for the judgment of management. It does not make operational decisions in lieu of management. To do so would usurp management’s proper role and involve the Board too deeply, both of which would be improper. Please see related document Board and Management Responsibilities. The Board can and should probe management’s analysis of the facts and decision-making process to ensure that it has considered all of the material facts and outcomes of its decisions. The Board can and should withhold approval of management’s decisions and recommendations if the analysis is weak or does not support the decisions and recommendations, and request management to return with improved decisions and recommendations.
1.3
The Board must ensure that it has all of the material information available which it must consider in making a decision or approving management’s decisions. Management must provide full (but concise), plain, true and timely information to the Board. The Board is reasonably entitled to seek outside advice, such as from corporate counsel, with or without management’s approval, in the exercise of its fiduciary duties, and at the Company’s expense.
1.4
The directors are stewards of the Company. The Board acts on behalf of the shareholders and is accountable to the shareholders for the conduct of the Board, management and the Company.
1.5
In supervising the conduct of Company, the Board, through the Chief Executive Officer ("CEO"), will set the standards of conduct for the Company.
1.6
These terms of reference are prepared to assist the Board and management in clarifying responsibilities and ensuring effective communication between the Board and management.
2
COMPOSITION AND BOARD ORGANIZATION
2.1
The number and composition of the Board depends upon the state of development of the early-stage technology company; typically three or five, of which the majority should be independent directors. Please see related document Board Composition.
2.2
The Board Chair shall be appointed by the Board for a term expiring at the conclusion of the next Annual General Meeting of the Company.
2.3
Directors will be elected at the Annual General Meeting of the Company and will serve until the conclusion of the next Annual General Meeting of the Company.
2.4
A vote by three-quarters of the Board, not including the Director in question, will be sufficient to remove a Director.
2.5
The Board operates by delegating to management certain of its authorities, including spending authorizations, and by reserving certain powers to itself.
2.6
Certain responsibilities of the Board may be delegated to Board committees. The responsibilities of those committees will be as set forth in their terms of reference, as amended from time to time.

2.6.1
Compensation and Human Resources Committee, whose responsibilities will include many of the items articulated in Section 3.2. Please see related document Compensation Committee Terms of Reference
2.6.2
Audit Committee, whose responsibilities will include many of the items articulated in Section 3.3. Please see related document Audit Committee Terms of Reference
2.6.3
At a time when it is deemed appropriate by the Board in consultation with management, the Board will constitute a Governance Committee whose responsibilities will include many of the items articulated in Section 3.4.
2.7
The Board retains the responsibility for managing its own affairs including the responsibility to:

i)
Appoint the Chairman of the Board;
ii)
Appoint, review and/or replace the Chief Executive Officer CEO Review Processand CEO Succession;
iii)
determine the frequency, timing and agenda for Board meetings. Please see related document Frequency of Board meetings;
iv)
annually review the skills and experience represented on the Board in light of rapidly changing business requirements. Please see related document Board Composition;
v)
recommend the criteria and potential candidates who meet the criteria to the Board. Please see related document Board Review;
vi)
on the recommendation of the Chair, appoint, determine the composition of and set the terms of reference for Board committees;
vii)
approve the terms of reference for the CEO and Chairman. Please see related document. Please see related documents Chair Terms of Reference and Board and Management Responsibilities;
viii)
implement an appropriate process for assessing the effectiveness of the Board, the Board Chair, committees and directors in fulfilling their responsibilities. Please see related document Board Review;
ix)
assess the adequacy and form of director compensation and make recommendations to the shareholders to approve the director compensation at the Annual General Meeting. Please see related document Director Compensation;
x)
assume responsibility for Company's governance practices and ensure they meet the needs of the shareholders, employees and customers; and
xi)
appoint the Secretary to the Board.
3.
DUTIES AND RESPONSIBILITIES
3.1

Company Plans

The Board has the responsibility to:

i)
participate with management in the development and approval of the Company's annual Operating Plan and Budget. Please see related document Board and Management Responsibilities;
ii)
approve other material plans that support the Company's ability to meet its Operating Plan;
iii)
direct management to develop, implement and maintain a reporting system to allow the Board to monitor the Company's progress towards the goals of the Operating Plan;
iv)
investigate major deficiencies in performance and major deviations from the Operating Plan and requests management to explain reasons and to develop and implement corrective action; and
v)
review and approve significant changes to the Operating Plan in light of changing business circumstances. Please see related document Board and Management Responsibilities
3.2

Compensation and Human Resources

The Board has the responsibility to:

i)
approve terms of reference for the CEO and appoint the CEO and plan for succession of the CEO, as required. Please see related document CEO Succession;
ii)
monitor and, at least annually, review the CEO's performance against agreed upon annual objectives. Please see related document CEO Review Process;
iii)
approve compensation plans for the CEO and senior management, including salary, cash incentive compensation and equity;
iv)
review and approve recommendations of the CEO with respect to the senior management structure, including such duties and responsibilities to be assigned to Officers of Company;
v)
on the recommendation of the CEO, appoint the Officers of Company who report to the CEO;
vi)
approve certain matters relating to all employees, including:

a)
Company's broad compensation strategy and philosophy;
b)
employee equity plans; and
c)
employee benefit programs;
d)
review and implement succession planning programs, as and when required according to the Board's discretion, including programs to train and develop management. Please see related document CEO Review Process;
3.3

Financial and Risk Issues

The Board has the responsibility to:

i)
monitor operational and financial results;
ii)
approve annual financial statements;
iii)
approve the financial plan for the company as recommended by management and as approved by the Audit Committee;
iv)
appoint external auditors and approve auditors' fees at such time as audited financial statements are required by the Board or external investors;
v)
take reasonable steps to ensure the implementation and integrity of Company's internal control and management information systems appropriate to its current state of development;
vi)
review the risk profile of the company in light of changing business circumstances. See related document Risk Assessment.
vii)
Please see related document Audit Committee Terms of Reference;
3.4

Governance

3.4.1
The Board has the responsibility to:

i)
provide advice, counsel and support to the CEO in the execution of the CEO's duties. See related document Relationship between Chairman and CEO;
ii)
provide advice and give prior approval to material decisions including the following:

-
all acquisitions, dispositions, mergers, etc.;
-
significant hiring decisions; and
-
changes in strategic direction;
iii)
With the approval of the Audit Committee, provide advice and give prior approval to material financial decisions including the following:

-
the company financing program and plans;
-
all term sheets proposing to raise financings;
-
all financings;
-
significant capital expenditures;
-
all issuances of securities;
-
investment policy;
-
declaration of dividends; and
-
approve the spending limits and materiality level for contracts which must be approved by the Board. Please see related documents Board and Management Responsibilities, Authorization Levels;
iv)
review and approve material contracts and expenditures;
v)
review and approve all proposals to be submitted to the shareholders for approval.
3.4.2
At the appropriate time, as determined by the Board in consultation with management, the Board should oversee:

i)
the adoption of a strategic planning process;
ii)
succession planning, including appointing, training and monitoring senior management; and
iii)
the adoption of a communications (investor relations) policy for the corporation.
3.5

Board Secretary

The role of the Secretary is to:

i)
in consultation with the CEO and Chairman, organize and publish the annual calendars for the Board and Committees;
ii)
prepare the Agenda for Board meetings in consultation with the Board Chair. See related document Organizing a Board Meeting;
iii)
prepare briefing binders for each Board meeting containing written memos to the Board on each Agenda item and clearly indicating which items require Board approval;
iv)
circulate the briefing binders to the Board at least 5 business days in advance of the meeting;
v)
organize the Board meetings;
vi)
take the minutes of the Board meetings, and have them reviewed by the Board Chair as soon as possible after the conclusion of the meeting. See related document Organizing a Board Meeting
vii)
maintain the share capitalization table including all shares, options, and vesting details;
viii)
liaise with legal counsel; and
ix)
ensure that the Minute Book and Share Registry are up to date.
3.6

By-Laws, Policies and Procedures

The Board has the responsibility to:

i)
approve and act as the guardian of Company's corporate values, including approving a Code of Conduct and Conflict of Interest Guidelines for Company;
ii)
direct management to ensure Company operates at all times within applicable laws and regulations and to the highest ethical and moral standards; and
iii)
approve changes to the Articles and By-laws of the Company subject to shareholder approval.
4.
GENERAL LEGAL OBLIGATIONS OF THE BOARD OF DIRECTORS
4.1
The Board is responsible for directing management to ensure legal requirements have been met, and documents and records have been properly prepared, approved and maintained.
4.2
Legal duties are imposed on directors. The basic legal duties are imposed at common law.
4.3
Directors are under a fiduciary duty to the Company to carry out the duties of their office:

i)
honestly and in good faith;
ii)
in the best interests of the Company;
iii)
with the care, diligence, and skill of a reasonably prudent person; and
iv)
with a view to the best interests of all of the shareholders. Specifically, Directors are required to act not to advance their individual interests as investors and shareholders over the interests of all of the shareholders.
v)
See related document Director Terms of Reference.
4.4
In order to execute their fiduciary duty, Directors have an obligation to make themselves fully informed on the issues by:

i)
reviewing the material presented by management; and
ii)
asking questions of management both at and between Board meetings to ensure that:

a)
the Board receives adequate and regular updates from management on all issues important to the business of Company; and
b)
major Company initiatives have proper and timely Board understanding, consideration, oversight and approval.
c)
Please see related document Holding Management to Account;
4.5
The CEO will pro-actively ensure the co-operation of the management team in assisting the Board in exercising its fiduciary duty in particular ensuring that the Board:

i)
has received all of the relevant information it needs to an appropriate level of detail;
ii)
is aware of relevant trends;
iii)
is aware of any material internal or external changes;
iv)
is informed of any actions or omissions which may cause the Company to be in violation of previous Board decisions, or the Code of Conduct of the Company, or its duties to shareholders, employees, partners and the public, broadly defined; and
v)
is aware of any changes in the assumptions upon which previous Board decisions were made.
4.6
Directors have specific statutory duties and obligations (and potentially personal liability) set out in legislation including:

i)
Provincial

a)
Corporations Act
b)
Environmental Management Act
c)
Employment Standards Act
d)
Social Services Tax Act
e)
Workers Compensation Act
ii)
Federal

a)
Excise Tax Act
b)
Income Tax Act
c)
Employment Insurance Act
d)
Criminal Code of Canada (Conspiracy).

Please see related document Risk Assessment.

TIMETABLE

  Q1 Q2 Q3 Q4
1. Governance        
Review Board skill sets wrt current company requirements    
Identify prospective new directors      
Prepare slate of Directors for AGM      
Review Board performance and compensation      
Annual General Meeting      
Approve Annual Report      
Ensure Minute Book, Share Register, Articles and By-Laws are up to date      
Review strategic plan      
2. Financial        
Receive report of Audit Committee      
Approve audited financial statements      
3. Compensation        
Receive report of Compensation Committee      
Review CEO performance      
4. Operations        
Approve annual Operating Plan and Budget      
Review performance against annual Operating Plan and Budget

1 These documents are developed specifically for Boards and management of early stage technology companies. See Preamble for the context in which these documents were developed.